Thursday, 22 December 2016

Europe’s Banks, The Crisis Weekend?

Baltic Dry Index. 926 +12   Brent Crude 54.44

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

Eurasian Snow cover. (How bad will winter be?)

Note. Barring an exceptional development, the next LIR update will be on Saturday Christmas eve. To all celebrating Christmas or just celebrating the holiday season, a very happy, safe, enjoyable time.

"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."

Henry Hazlitt

We open today with Christmas coming early for holders of Spanish mortgages. Bad news though for Spanish banks. Time seems to have finally run out for the world’s oldest bank. Europe’s dodgy banking system very likely collapses in 2017.

Spanish Banks Lose EU Case on Mortgage Interest Repayments

by Stephanie Bodoni and Macarena Munoz Montijano
21 December 2016, 08:50 GMT 21 December 2016, 12:39 GMT
Spanish banks, including Banco Popular Espanol SA and Banco Bilbao Vizcaya Argentaria SA, may have to give back billions of euros to mortgage customers after a final ruling by the European Union’s top court. Bank shares tumbled by as much as 10 percent.

Borrowers who paid too much interest on home loans pre-dating a May 2013 Spanish ruling on so-called mortgage floors are entitled to a refund from their banks, judges at the EU Court of Justice ruled in Luxembourg Wednesday.

The court said that a proposed time limit on the refunds is illegal and customers shouldn’t be bound by such unfair terms. Banco Sabadell SA fell as much as 7.5 percent, while Banco Popular slipped as much as 10.5 percent, the largest decliner in Spain’s Ibex 35 benchmark.

"This comes as a surprise and in a bad moment for Spanish banks as most of them would have to make extra provisions to pay for this,” Daragh Quinn, an analyst at Keefe Bruyette & Woods, said by phone. "It will mean pressure on capital generation and profits in the fourth quarter."

The EU court case comes as Spanish banks are under pressure from low interest rates and weak demand for credit, affecting their traditional business of lending. With 521 billion euros, home loans are one of the largest parts of Spanish bank lending business as they grew their real estate exposure during a construction boom in the country that burst at the end of the last decade. Some banks are still making provisions for bad loans, which also adds pressure to profit.

BBVA estimated in July that the maximum impact from a negative ruling would be 1.2 billion euros, while CaixaBank SA said at the time it would have to refund homeowners as much as 1.25 billion euros. CaixaBank has already provisioned 515 million euros, it said.

The capital ratios of smaller lender Liberbank SA and CaixaBank will be hit hardest by the ruling, brokerage firm Renta 4 said in a note to clients Wednesday. Liberbank will see a 75 basis points impact on its CET1 ratio, while CaixaBank will suffer a 40 basis points hit. Banco Popular will have a 36 basis points impact.

Spain’s Households Toast Mortgage Win While Italy’s See Bond Hit

by Charles Penty, Thomas Gualtieri, and Macarena Munoz Montijano
Ivan Muniz is starting to think how he would spend the 6,000 euros ($6,300) he estimates he could win back from his bank for charging him too much for his Spanish mortgage.

“I would like to go traveling -- to New York or maybe also London,” said Muniz, a steelworks quality-control inspector from Gijon in northern Spain. “It was time that someone put their fist down and said that what banks were charging wasn’t right.”

Spanish banks and borrowers are assessing the impact of a ruling by Europe’s top court that lenders charged too much for mortgages. The decision could mean a potential bonanza for homeowners in the form of compensation. That contrasts with Italy, where bondholders are bracing for massive losses as the country’s troubled banks face the prospect of being nationalized.

“The behavior of banks has been very negative over many years due to the lack of transparency in their relationship with clients,” Carlos Sancho, a lawyer and senior lecturer of financial management at IESE Business School, said by phone. "Banks need to start playing fairly with clients -- it’s incredible the stubborn resistance they have had to face on this issue."

In this case, clauses in loan contracts enabled banks to refuse to pass on the impact of falling interest rates to customers. Borrowers who paid too much interest on home loans before a May 2013 Spanish ruling on so-called mortgage floors are entitled to a refund from their banks, judges at the EU Court of Justice ruled in Luxembourg on Wednesday.

That’s good news for Muniz, who took out a mortgage in 2008. His mortgage agreement included a floor clause that meant he would never pay less than 4.25 percent on his loan even as interest rates plunged. While his bank agreed to remove the floor on his mortgage, he can now expect to win back the extra interest he paid over the whole life of the loan.

Paschi Falls as Buyers Said to Balk, Making State Aid Likely

by Sonia Sirletti
Banca Monte dei Paschi di Siena SpA will probably fail to lure sufficient demand for a 5 billion-euro ($5.2 billion) capital raise, said people with knowledge of the matter, making a state rescue likely.

No anchor investor has shown interest in the recapitalization so far, the Siena-based company said in a statement late Wednesday after a board meeting. Two debt-for-equity swap offers will raise about 2 billion euros, with investors converting bonds for about 2.5 billion euros, the lender said.

Banca Monte dei Paschi di Siena SpA will probably fail to lure sufficient demand for a 5 billion-euro ($5.2 billion) capital raise, said people with knowledge of the matter, making a state rescue likely.

No anchor investor has shown interest in the recapitalization so far, the Siena-based company said in a statement late Wednesday after a board meeting. Two debt-for-equity swap offers will raise about 2 billion euros, with investors converting bonds for about 2.5 billion euros, the lender said.

The lender’s subordinated bond risk rose to a record. Its 500 million euros of junior notes due in March 2019 fell 6 cents on the euro to an all-time low of 44 cents, according to data compiled by Bloomberg. Credit swaps insuring the bank’s junior bonds for five years now imply a 70 percent chance of default, data compiled by CMA show.

---- Here is a summary of other Italian lenders facing pressure to shore up their finances and get rid of soured debt on their books.

Banca Carige SpA: The European Central Bank instructed the Genoa-based lender to step up efforts to reduce sour debt on its balance sheet, giving it until Feb. 28 to present a more aggressive proposal. The existing plan calls for cutting the total to 19.9 percent by 2020 from 27.8 percent in 2015. The bank, which is struggling to restore investor confidence after revising its 2012 and first-half 2013 accounts, posted a loss in the third quarter on falling revenue and higher provisions for bad loans.

Elsewhere, the great holiday wind down was underway. The President-elect geared up for his coming fight with China. 2017 is certainly going to be different.

“I think we agree, the past is over.”

President George W. Bush.

Asian shares slip in holiday-thinned trade, focus turns to U.S. data

Wed Dec 21, 2016 | 10:52pm EST
Asian shares struggled on Thursday after a lacklustre performance on Wall Street, with investors looking to U.S. economic data later in the day for potential catalysts even as markets started winding down ahead of the holidays.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS erased early modest gains and slipped 0.3 percent, while Japan's Nikkei stock index .N225 was down 0.2 percent.

U.S. stocks, which have been on a tear since the Nov. 8 election on bets that the incoming administration of Donald Trump will embark on growth-stimulating policies, pulled back from the record highs logged in the previous session.

"There weren't any major market-making data points coming out, and I think that's why the markets are kind of taking a breather," said Jennifer Vail, head of fixed income research at U.S. Bank Wealth Management in Portland, Oregon.

Later on Thursday, the United States will release a third revision of U.S. third quarter gross domestic product.

"It could be a volatile day if it comes in either substantially stronger or substantially weaker," she said.

Durable goods orders for November and weekly initial jobless claims were also scheduled to be released.
Thin liquidity could also amplify moves, with many investors already departing ahead of this weekend's Christmas holiday. Markets in Tokyo will be closed on Friday for the Japanese Emperor's birthday.

Trump picks 'Death by China' author for trade advisory role

Wed Dec 21, 2016 | 11:10pm EST
U.S. President-elect Donald Trump named Peter Navarro, an economist who has urged a hard line on trade with China, to head a newly formed White House National Trade Council, the transition team said on Wednesday.

Navarro is an academic and one-time investment adviser who has authored a number of popular books and made a film describing China's threat to the U.S. economy as well as Beijing's desire to become the dominant economic and military power in Asia.

Trump's team praised Navarro in a statement as a "visionary" economist who would "develop trade policies that shrink our trade deficit, expand our growth, and help stop the exodus of jobs from our shores."

Trump, a Republican, made trade a centerpiece of his presidential campaign and railed against what he said were bad deals the United States had made with other countries. He has threatened to hit Mexico and China with high tariffs once he takes office on Jan. 20.

Navarro, 67, is a professor at University of California, Irvine, and advised Trump during the campaign. He has authored several books including "Death by China: How America Lost its Manufacturing Base," which was made into a documentary film.

As well as describing what he sees as America's losing economic war with China, Navarro has highlighted concerns over environmental issues related to Chinese imports and the theft of U.S. intellectual property.

While Trump in the statement praised the "clarity" of Navarro's arguments and the "thoroughness of his research," few other economists have endorsed Navarro's ideas.

Marcus Noland, an economist at the Peterson Institute for International Economics, likened a tax and trade paper authored by Navarro and Wilbur Ross, who has been named as Trump's commerce secretary, to "the type of magical thinking best reserved for fictional realities" for what he said was its flawed economic analysis.

Navarro has also suggested a stepped-up engagement with Taiwan, including assistance with a submarine development program.

He argued that Washington should stop referring to the "one China" policy, but stopped short of suggesting it should recognize Taipei, saying: "There is no need to unnecessarily poke the Panda."

China considers Taiwan a renegade province and has never renounced the use of force to bring it under its control.

---- In an opinion piece in Foreign Policy magazine in November, Navarro and another Trump adviser, Alexander Gray, reiterated the president-elect's opposition to major trade deals, including the Trans-Pacific Partnership.

"Trump will never again sacrifice the U.S. economy on the altar of foreign policy by entering into bad trade deals like the North American Free Trade Agreement, allowing China into the World Trade Organization, and passing the proposed TPP," Navarro and Gray wrote. "These deals only weaken our manufacturing base and ability to defend ourselves and our allies."

Trump has vowed to pull the United States out of the TPP, a free-trade pact aimed at linking a dozen Pacific Rim nations that President Barack Obama signed in February. It has not been ratified by the U.S. Senate.

Europe is a molehill. All great empires and revolutions have been on the Orient; six hundred millions live there.

Napoleon. French Dictator.

At the Comex silver depositories Wednesday final figures were: Registered 38.17 Moz, Eligible 146.98 Moz, Total 183.15 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
No crooks today,  we wanted to enter the Christmas break on a positive note. Below, oil rich Saudi Arabia gets on the solar power band waggon. Electric power generation will be completely transformed this century.

Saudis Accelerating Sunward Tilt in Charge for Oil Revenue

by Anna Hirtenstein
21 December 2016, 04:00 GMT 21 December 2016, 11:55 GMT
Saudi Arabia’s long-awaited drive to free up more oil revenue by shifting to solar power generation is expected to pick up speed next quarter, according to local developers eyeing contracts.

“I’m fully expecting within the first quarter 500 megawatts to come out in tenders and then it’ll ramp up,” said Paddy Padmanathan, the chief executive officer of Acwa Power International in Riyadh. “That will be a game changer for the region.”

The world’s biggest crude exporter also burns more oil than any other country to generate electricity. According to the most recent International Energy Agency figures, the kingdom consumes at least 900,000 barrels a day at peak periods of the year to keep the lights on -- an amount worth over $16 billion a annually based on current oil spot prices. Integrating more solar power onto the Saudi grid could free up more crude for export.

Saudi Arabia plans to add another 700 megawatts from wind and solar power generation in 2018 according to people familiar with the plan, who said the kingdom forecasts another 8.8 gigawatts of renewable energy added to the grid between 2019 and 2023.

“We expect Saudi Arabia will be the largest market in the region in the medium to long-term,” said Sami Khoreibi, the founder and chief executive officer of Enviromena Power Systems, a solar developer based in Abu Dhabi. “You take a look at the opportunity cost of using crude oil for electricity production and you have a very high operating expense, and the power demand growth in Saudi Arabia is one of the largest in the region.”

Saudi Arabia’s on-again, off-again pursuit of solar energy has already shown signs of picking in the last six months as the kingdom struggled to patch budget holes and map future economic diversification.

Saudi Potential

Acwa Power and Fotowatio Renewables Ventures BV were both shortlisted for a 100-megawatt solar tender offered during the second half of 2016. The two 50-megawatt projects will be located in Al-Jouf and Rafha in northern part of the peninsula, according to the state utility.

“It is starting,” said Rafael Benjumea, CEO of Fotowatio, which is owned by Abdul Latif Jameel in Jeddah and won a bid in May to help build an 800-megawatt solar plant in Dubai.

“Of course it has taken very long but there’s a clear move to change their renewable energy mix,” he said. “There’s a lot of potential in the Saudi market.”

Remember that there is nothing stable in human affairs; therefore avoid undue elation in prosperity, or undue depression in adversity.


Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

An invisible electrode

Date: December 19, 2016

Source: ICFO-The Institute of Photonic Sciences

Summary: A flexible transparent conductor free of reflection and scattering has been developed by researchers.

Transparent conductors are one of the key elements of today's electronic and optoelectronic devices such as displays, light emitting diodes, photovoltaic cells, smart phones, etc. Most of the current technology is based on the use of the semiconductor Indium Tin Oxide (ITO) as a transparent conducting material. However, even though ITO presents several exceptional properties, such as a large transmission and low resistance, it still lacks mechanical flexibility, needs to be processed under high temperatures and is expensive to produce.
An intensive effort has been devoted to the search of alternative TC materials that could definitively replace ITO, especially in the search for device flexibility. While the scientific community has investigated materials such as Al-doped ZnO (AZO), carbon nanotubes, metal nanowires, ultrathin metals, conducting polymers and most recently graphene, none of these have been able to present optimal properties that would make them the candidate to replace ITO.
Today ultrathin metal films (UTMFs) have been shown to present very low resistance although their transmission is also low unless antireflection (AR) undercoat and overcoat layers are added to the structure. ICFO researchers Rinu Abraham Maniyara, Vahagn K. Mkhitaryan, Tong Lai Chen, and Dhriti Sundar Ghosh, led by ICREA Prof at ICFO Valerio Pruneri, have developed a room temperature processed multilayer transparent conductor optimizing the antireflection properties to obtain high optical transmissions and low losses, with large mechanical flexibility properties. They have published their results in a recent paper published in Nature Communications.
In their study, ICFO researchers applied an Al doped ZnO overcoat and a TiO2 undercoat layer with precise thicknesses to a highly conductive Ag ultrathin film. By using destructive interference, the researchers showed that the proposed multilayer structure could lead to an optical loss of approximately 1.6% and an optical transmission greater than 98% in the visible. As Prof. Valerio Pruneri states, "we have used a simple design to achieve a transparent conductor with the highest performance to date and at the same time other outstanding attributes required for relevant applications in industry." This result represents a record fourfold improvement in figure of merit over ITO and also presents superior mechanical flexibility in comparison to this material.
The results of this study show the potential that this multilayer structure could have in future technologies that aim at more efficient and flexible electronic and optoelectronic devices.

The monthly Coppock Indicators finished November

DJIA: 19124  +53 Up NASDAQ:  5324 +41 Up. SP500: 2198 +58 Up

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